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April 13th, 2018

What If the Seller Misrepresented the Condition of the Property?

There are many things that can hamper a real estate deal. A house may not have the marble countertop you were looking for or the yard may not have a fence to offer more privacy. These are minor issues that a motivated homeowner may be willing to live with in order to secure a suitable house. However, there are other issues that may be more serious and critical to a homeowner’s decision to purchase a property. The house may have a major foundation or structural issue, or suffered flooding or fire damage that has not been remedied.

A buyer who pays a large amount to purchase a home may feel they were cheated and deceived in a deal when they discover they have to pay thousands more to make repairs. Many buyers simply may not have sufficient funds remaining to perform repairs and their house may continue to deteriorate. Alternatively, they may end up paying for the repairs, but miss making mortgage payments and risk losing their house to foreclosure. Some homeowners may find that they cannot continue to own or live in the house, and are forced to sell it at a lower price than what they originally paid.

Property Condition Misrepresentation

During the sale of a property, the seller will be presented with a property disclosure statement (PDS). This form is used to reveal any pertinent information regarding the condition of the property. The seller should disclose any defects that were not repaired so that the buyer is fully aware of the real condition of the house. They should also present any documentation regarding repairs they made to address the issue. There are also disclosure statements that cover condominiums (Strata Property Disclosure Statement) and rural land (Rural Property Disclosure Statement).

However, revealing certain defects may prevent the sale of the property or reduce the price of a property. Some sellers may omit known defects from the disclosure agreement in an effort to sell their property at a higher price. This intentional omission means that the seller misrepresented the condition of the property to buyers in a fraudulent manner. Other fraudulent ways to misrepresent the condition of the property is to mislead the buyer about property lines, easements, and work that was completed at the property without a legal permit.

In addition to fraudulent misrepresentation, there is also negligent misrepresentation and innocent misrepresentation. Negligent misrepresentation occurs when the seller makes a misleading statement when it was unreasonable for them to do so. Innocent misrepresentation occurs when the seller makes an error or mistake about an issue, but believed their statement to be true.

Example of Misrepresentation in Real Estate

One recent case of misrepresentation regarding the condition of a property is Perzoff v. Pringle, 2017 BCSC 1448. In that case, the plaintiffs bought a house that had been renovated by the vendor who was a contractor. The vendor represented that he was unaware of any water problems in the basement and that the entire house had been renovated in accordance with the building code. After the purchase, water damage in the basement was discovered. The purchasers sued the vendor for the repair costs and were successful.

The court held that on the facts of the case, the statement that the house had been renovated to Code was both a breach of the contract and a negligent misrepresentation. The court also held again on the facts of the case that the drainage system installed by the vendor was a latent defect that made at least part of the basement unlivable. The vendor was also found liable for negligence for his failure to install a proper drainage system. The purchasers were awarded damages for the costs of repair and some lost income for a suite they wanted to rent out in the water logged basement.

Suing a Seller for Misrepresentation

It is possible to sue a seller for misrepresentation. Normally, a lawsuit will involve fraudulent or negligent misrepresentation where the seller knew of an issue but deliberately hid it from the buyer or failed to disclose it when they should have. It can be difficult to prove innocent misrepresentation because the seller may not have been aware of the defect or may have made an honest mistake or error.

The case will rely on proving the seller intended to deceive you or was unreasonable in their failure to disclose an issue. In addition, you will have to prove that you relied on the statements in the disclosure agreement when you decided to complete the purchase. Going over disclosure documents about the property from previous sellers, a strata corporation, or a municipality, and reviewing repair documents may establish that the seller was or should have been aware of the issue.

If you recently bought a home only to discover serious issues that you believe the seller knew about or should have known about but failed to mention in the disclosure agreement, you may be able to bring a case against the seller. Contact the law professionals at McLarty Wolf. We are litigation lawyers who can review your case and provide the appropriate legal representation.